Premium Brands Holdings saw first-quarter volumes in Canada return to growth but the performance was still below par due to stretched consumers.
The meat protein, sandwich and seafood supplier reiterated how the “economic environment” in Canada remained tough, reflected in weakness in both the retail and foodservice channels.
Consequently, Premium Brands delivered “below normal” volume growth of 1.1% in Canada, with the 2.2% increase in first-quarter group revenues led by the US in its core and largest division of Specialty Foods.
“In terms of the Canadian market, despite the difficult economic environment, we did make some progress in stabilising our Specialty Foods sales, which generated organic volume growth of 1.1% as compared to a 4.3% contraction in the previous quarter,” president and CEO George Paleologou explained.
“We are also seeing some positive signs for our lobster businesses with a solid start to the first Canadian fishery of 2024.”
Lobster supply, however, continued to be problematic for the smaller Premium Food Distribution (PFD) business unit, where revenue fell 1.5% linked to volume losses amounting to C$25.5m ($18.6m).
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“The contraction in PFD’s sales volume was primarily due to lobster supply shortages caused mainly by a decline in the Maine lobster catch of approximately 20% in the third quarter of 2023 and a poor southwest Nova Scotia fishery in the fourth quarter of 2023,” Premium Brands said.
However, the decrease in supply from both fisheries, due to poor weather conditions impacting harvesting, was described as “transitory”.
Premium Brands predicted PFD’s performance will be similar in the second quarter and return to growth in the back half, helped by “some stability in the Canadian consumer in our beef and seafood programmes”, Paleologou said.
CFO Will Kalutycz added: “We continue to struggle with consumers trading down to discount banners where we just don’t sell our premium beef and seafood programmes.
“But we were helped this quarter by a really strong Atlantic salmon fishery that position them well to do a lot of featuring with retailers. So that’s helped offset some of that weakness, but that’s something we don’t expect to continue into Q2.”
Paleologou provided some insight into the consumer environment, particularly related to the out-of-home segment, noting “there’s evidence that menu inflation in both Canada and to a lesser extent in the US is an issue”.
On a brighter note for the consumer, Premium Brands alluded to price cutting for poultry within the Specialty Foods division, which posted a 4.1% increase in revenue and volume growth of 5.6%.
The latter was even greater in the US at 9.7%, driven by volume gains in proteins, sandwiches and baked goods.
Kalutycz said: “A year ago, poultry prices were at absolute record highs and they’ve come down significantly. And we talked a bit about this last year, we did see a little bit of demand destruction.
“And so, we have been passing on some of those savings to our customer to get those volumes back and we’re seeing the success of that strategy.”
